Single Payer Utopia?

The American Prospect, a magazine of liberal thought, carries an article in its current issue by Marcia Angell, M.D., of Harvard and former editor-in-chief of The New England Journal of Medicine that does indeed offer fuel for thought.

Her article, "Health Reform You Shouldn't Believe In," examines the universal health coverage law in Massachusetts, criticizing "incremental efforts to increase coverage by expanding private insurance." She concludes that a single-payer system is the only viable option.

Dr. Angell's earlier diatribes against the pharmaceutical industry are evidence of her animosity toward any private involvement in the health sector. And this latest article shows her clear hostility toward private insurance.

While I agree with some of her assessment of the flaws in the Massachusetts health reform experiment, I could not disagree more about her conclusions.

In a section of her article subtitled "Massachusetts miracle or mirage?," she acknowledges a truth that Massachusetts politicians are reluctant to admit: "While those beneath the poverty level signed up for free insurance in even greater numbers than anticipated, very few people who were required to pay for their own insurance signed up. Even those eligible for partial subsidies were slow to enroll," Angell says.

"The deadline to purchase insurance had to be extended, and 60,000 uninsured people were exempted from the mandate because — yes, that's right — they couldn't afford it (so much for universality)," according to Angell.

"Don't get me wrong," she says. "Massachusetts is to be congratulated for seeking to extend health care to everyone in the state. Every decent society should ensure health care, just as it does education, clean water, and police and fire protection. Massachusetts' plan is an ambitious and well-intentioned effort. But unfortunately, it's extremely unlikely to work for three main reasons," she says.

To summarize her points:

"First, the individual mandate is harsh, regressive, and probably unenforceable. It requires the near-poor to pay a much higher percentage of their income on health care than their more affluent neighbors…It also lets employers off the hook…

"Second, like all such plans, the Massachusetts strategy pretends that having insurance is the same as having health care. The Connector makes much of the fact that some 300,000 people who were previously uninsured now have insurance, but most of those already had access to health care, either through the free-care pool or Medicaid. So it's something of a shell game, with money that would have been spent directly on health care passed through insurance companies instead…

"Third and most important, there is no effective mechanism for containing costs… And sure enough, premiums have continued to rise faster than the background inflation rate (10 percent for Commonwealth Care next year). The only way to hold them in check is to cut benefits or increase deductibles and co-payments…The state, which now faces a $1.2 billion budget shortfall and health costs of $147 million more than projected, will not be able to contribute much more from general revenues. Funding depends utterly on the Medicaid waiver being renewed in July, by no means a sure thing."

All incremental efforts at reform are doomed because they leave "our current dysfunctional system essentially intact," Angell concludes. Her verdict: "The only workable solution is a single-payer system (there, I said it), in which everyone is provided with whatever care he or she needs regardless of age and medical condition. There would no longer be a private insurance industry, which adds little of value yet skims a substantial fraction of the health-care dollar right off the top. Employers, too, would no longer be involved in health care. Care would be provided in nonprofit facilities. The most progressive way to fund such a system would be through an earmarked income tax, which would be more than offset by eliminating premiums and out-of-pocket expenses."

Angell says the reason this has not happened is because "the private insurance industry has managed to convince many political leaders, including progressives, that a single-payer system is unrealistic. But what is truly unrealistic is anything else," she says. "My greatest concern about the Massachusetts plan is that when it unravels, people will draw the wrong lesson. They will assume that universal care at a cost we can afford is impossible, and give up on it. It's not impossible; it's just unlikely to be achievable while leaving our dysfunctional system in place."

So she envisions a utopia where "everyone is provided with whatever care he or she needs regardless of age and medical condition," with care "provided in nonprofit facilities" and funded by "an earmarked income tax."

The lack of understanding of economic and political forces is alarming. And there also is no indication that she recognizes the positive forces in our health sector today that are advancing medical progress, such as:

…private partnerships like the Asheville Project that show we can bring down the costs of treating those with chronic illnesses like diabetes while improving the quality of care

…Wal-Mart's consumer responsiveness in offering a month's supply of generic drugs for $4

…the success of the Medicare prescription drug benefit offered by private, competing companies that provide broad access to generic and brand name drugs while the program is coming in hundreds of billions of dollars below budget estimates

…the $60 billion in private investment by pharmaceutical companies this year alone to develop tomorrow's new medicines.

…the success of employers in holding health cost increases down by using financial incentives to engage employees as partners in managing their health and health care

And the list could go on and on.

Are we really so polarized? We agree on the problem, but we have such vastly different views on the solution that you wonder if we ever will make progress. An article in the section below links to a story from The Hill as evidence of the difficulty of sweeping reform.

Starting with a good diagnosis is important. But, my goodness, we will need to reach some agreement on a treatment plan.

The Congress is in a showdown over legislation that would block seven Medicaid rules designed to reduce some of the most obvious fraud and abuse of the program. The White House said that President Bush will veto the legislation if it comes to his desk. The House this week passed the legislation by a veto-proof 349-62. And Senate Majority Leader Harry Reid is planning to fast-track the legislation to the floor, bypassing the Senate Finance Committee, where th
e bill could face resistance.

Here is the short version of my testimony before the House Energy and Commerce Committee about this issue. If nothing else, this shows how difficult it is to curb even documented abuse once a government health spending program is established. We must avoid expanding these expensive programs that take on a life and constituency of their own.

And you won't want to miss our major Spring conference, the big Medicare Forum we are co-hosting on Tuesday at the Newseum in Washington, D.C. This is a significant program, featuring a major address by HHS Secretary Michael Leavitt and a very distinguished panel of Medicare experts.

You should have received an invitation earlier this week, but if not, you can still register. It's going to be a major event which will be webcast by the Kaiser Family Foundation. If you can join us, please do!

[And, by the way, we don't write these headlines, just the articles…] Grace-Marie Turner, Galen Institute The Buffalo News, 04/21/08

Sens. Hillary Clinton and Barack Obama are exchanging blows almost daily over whether the government should require everyone to have health insurance or not, writes Grace-Marie Turner. But their debate over an individual mandate has obscured the fact that — in almost every other area — the candidates have nearly identical visions and plans for health reform. Both want to require insurers to accept all applicants. Both candidates want a national "pay or play" mandate, forcing employers to cover a preset percentage of their workers' health insurance or pay a fine. And both would massively expand Medicaid and the State Children's Health Insurance Program. The list goes on, but the overriding principle for Sens. Obama and Clinton is clear — toward a much bigger role for the government over health care decisions. But that thinking is what caused many of the problems in our health sector today. What the insurance market actually needs is more competition — not more regulation.

The Hillreports that Congressional Democrats are backing away from healthcare reform promises made by Clinton and Obama, saying that even if their party controls the White House and Congress, sweeping changes will be difficult.

Mark V. Pauly, Wharton School of the University of Pennsylvania American Enterprise Institute, 04/18/08

Wharton economist Mark Pauly's new book argues that unavoidable limits on Medicare financing can best be imposed through market-based choices rather than through government direction. In the short run, bringing competition to Medicare will save money for beneficiaries and improve the quality of health care; in the long run, it may save Medicare. Pauly suggests we build upon the success of the Medicare Advantage program, which gives beneficiaries private insurance alternatives to the traditional government-managed Medicare program. Pauly proposes converting the traditional Medicare program to an explicit voucher, operating under the same rules as the private plans. This would create a neutral Medicare market and provide a mechanism for setting realistic limits on the growth in spending. Competition would promote efficiency and give seniors the freedom to decide how to economize on spending growth.

Legislation passed recently by the House of Representatives would require every health savings account transaction to be reviewed and verified as a legitimate medical expense, adding a layer of bureaucracy that could sharply reduce the appeal and cost savings of HSAs, The Wall Street Journal writes in an editorial. Having lost the policy argument when HSAs were created, Democrats now are trying to kill them with regulatory subterfuge, the editorial says. The new scheme purports to ensure that money saved tax-free in an HSA is actually used for health expenses. But this is a nonproblem: Any withdrawal from an HSA is already subject to a federal tax audit, just as individual tax returns are. In any case, if people cheat on their HSAs, they are only cheating themselves. When a medical expense arises below the insurance deductible, they will be the ones paying for it, whether from their HSA or another bank account. The Senate should stop this one dead in its tracks.

Today's Wall Street Journal features several letters in response to the editorial.

Online technologies and practices that people use to share opinions, insights, and experiences with each other are empowering, engaging, and educating consumers and providers in health care, writes Jane Sarasohn-Kahn, a health care economist and management consultant. Consumers are quickly adopting such social networks: One in three Americans used some form of social media online for health in 2007. People with chronic health conditions are sharing their stories with each other, not just for emotional support, but also for the clinical knowledge they gain from participating with "patients like me" in an online community. Doctors are meeting up online to discuss challenging cases with colleagues. Researchers are coming together with patients to learn about side effects in real-time to improve therapeutic regimens. In the next few years, Sar
asohn-Kahn says we will see countless social media projects focusing on specific diseases and sub-specialty areas, built by and for patients, caregivers, and providers. The ongoing demands of a consumer-driven health marketplace will inspire innovation in applications that integrate clinical and financial information and ratings sites will grow in number and type.

Only a consumer-centered health care system offers the incentives needed to maximize value and produce more for less systemically and consistently over the long term, writes Ed Haislmaier of The Heritage Foundation.

Gorman and Jensen examine key issues that many state initiatives have failed to adequately address, including universal coverage, consumer-directed health reforms, electronic medical records, guaranteed issue and community rating, and health insurance mandates. From an individual's point of view, a mandate is tax, write the authors. By forcing people to buy a product they may not want at a price they cannot control, the individual mandate functions as a potentially unlimited tax for health insurance. It also ignores the fact that having health insurance does not guarantee medical care — which is a particular problem in government programs with reimbursement rates so low that physicians and hospitals choose not to participate. Excessive government regulation cripples markets for individual health insurance, increases health insurance costs for large numbers of people, expands dependence on government programs, and slows innovation in health care delivery and coverage, conclude Gorman and Jensen. Sound health reform should include the key elements of competition, consumer control, and deregulation.

The Heritage Foundation's Bob Moffit describes six key tests for state health reform and writes that there is one overarching policy goal that should unite legislators seeking to develop and implement conservative or free-market reform: The legislative changes would shift the locus of decision-making to individuals and families, and they — not insurers or the government or employers — should control the flow of health care dollars.

James C. Capretta and Peter Wehner, Ethics and Public Policy Center The Weekly Standard, 04/28/08

The success of the Medicare prescription drug benefit will rank as one of George W. Bush's best domestic legacies, write Capretta and Wehner. Now in its third year, the drug benefit is working better than predicted. More than 1,800 private plans are competing for enrollment and independent surveys show 85% of beneficiaries are satisfied with their coverage. The program's competitive design is holding down costs for the government as well. There are important lessons to draw from this experience, write Capretta and Wehner. For liberals it is that the greatest threat to public support for their ideology is reality. It's been said that you can prove the possible by the actual — and in this case, the "actual" is that sensible public policy can liberate markets to work in health care just as they work in every other area. For conservatives, they say there is a need to accept the reality of measured steps in health and entitlement reform. The best approach is to gradually introduce markets and individual choice and ownership without threatening the security of the known. To his credit, President Bush recognized early on that adding a new drug benefit to Medicare presented a rare opportunity to introduce competition into the program, and he seized it.

Congress has been in a regulating mood for the past few years, spurring federal agencies directly or indirectly to pile new regulatory requirements (and inflated costs) onto myriad consumer products and activities, writes Henry Miller. But regulation has costs — both monetary and through the inhibition of innovation — which must be weighed against benefits. Some of the worst regulatory excesses occur when the government is exercising its "gatekeeper" role, in which it must grant permission before a product can be marketed, as is the case for pharmaceuticals and pesticides. Regulators of these products are highly risk-averse, often discounting or ignoring the costs of life-saving products that are delayed or abandoned. As a result of pharmaceutical regulators constantly raising the bar for approval, bringing a new drug to market now requires 12 to 15 years and costs more than $1 billion. Instead of overreacting to acknowledged failures of oversight, Congress and federal regulatory agencies should consider carefully how we can come closer to the ideal of finding the amount of regulation that is necessary and sufficient for a given product, process or activity, and of imposing costs that are commensurate with the societal benefits.

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features a commentary by Grace-Marie Turner on the major developments and issues of the week as well as summaries of writings by participants in the Health Policy Consensus Group and other articles of interest from the health policy world, plus announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.

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